- Oil prices are back on the downward trend.
- Copper prices have also experienced some weakness.
- Commodity trends suggest a full economic recovery is imminent in some time.
The resource space tends to increase during economic expansion and decrease during contractions. That’s because no matter how advanced or digitalized the economy is, physical goods are required that enable innovation. So it’s no wonder that the latest trends are suggesting that the economy will weaken from here.
Oil, copper blocks after recovery
Oil prices have struggled in recent sessions, falling below $ 40 a barrel. That is still way above the short-lived scenario speculators have created Oil prices turn negative for the first time in history this year. However, a decline is still a sign of weakness.
Global energy demand is falling, so oil demand is falling. Some of that comes from consumers who are now working from home instead of commuting. Part of this is reduced industrial demand. In any case, not all demand will return when the world economy restructures.
Meanwhile copper, a metal known as “Doc” copper is also in trouble thanks to its correlation between price and economic growth.
The beauty of copper is that it can be used in low tech applications like plumbing and high tech applications like wire. While prices have been weak in the past few sessions, the metal has risen well after the strike an 11-year low in March.
However, this rally has proven to be short-lived. Copper prices are now fueling up even after speculators On big bets the metal would go higher.
Commodity Wild Cards: The Demand for US Dollars and China
Where the goods go from here may depend in part on the future wealth of the US dollar. The reserve currency of the world was expects a long-term declineSo it has of course surprised the market with a rally in recent weeks.
Because commodities around the world are valued in US dollars, changes in the value of greenbacks can affect the role commodities play. For example, although the dollar was weakening, it was The last major currency in which gold hit new all-time highs earlier this year.
The dollar may not always be for it, but if it’s not going to gold or cryptocurrency, it tends to hold some value with investors during times of uncertainty. But after the sudden surge in the dollar, it began to decline again.
In general, traders also look to China when it comes to commodity trends. The massive nation is an importer of all goods and theirs Buying activity can have a huge impact on price of goods like copper and oil. The influential country saw a decline in its import activities in 2020 despite strategic purchases in an area such as Iron ore managed to move prices to multi-year highs.
Ultimately, it is clear that raw material prices are showing what we already suspect. The economy will take some time to recover. The quick gains from simply reopening have now largely had an impact. The long-term changes will also play a role.
Until commodity prices look more uniformly bullish, it is best to assume that economic growth will be slow and steady, rather than a massive roar back to pre-Covid times.
Disclaimer: This article reflects the author’s opinion and should not be viewed as investment or trading advice to CCN.com. Unless otherwise stated, the author has no position in any of the securities mentioned.